Adding Fuel To The Fire

Not too many years ago, higher fuel prices were a non-issue with CropLife® 100 retailers. Indeed, in the 20th annual survey of the nation’s top ag retailers in 2003, fuel prices didn’t even rank among the top five issues when respondents were asked to list their key market concerns for the year. The following year, 2004, fuel prices again failed to register.

My, how things have changed. From a non-issue during the early 2000s, fuel prices have become the issue during the middle years of the decade. In our magazine’s 22nd annual CropLife 100 survey last year, concern over higher fuel prices easily led the field of top limiting growth factors at 53%.
Moving into 2006, higher fuel prices again look to be on pace to lead the top five limiting-factors pack. Although it’s still early in the survey collection process (with approximately 35% of the forms returned at presstime), 60% of responding retailers have indicated higher fuel prices as the biggest challenge to their profitability moving into the 2007 growing season.

“We are experiencing big pressure on margins and high expenses for things such as fuel,” says Peter Vail, president of Carolina Eastern-Vail, Inc., Niverville, NY. “At this time, we have not been able to recoup these added expenses.”

Presenting something of a perfect economic storm for retailers, there are indications that higher fuel prices are among the many factors that have severely curtailed grower-customer spending in 2006. According to Dan Kennedy, general manager for Ritter Crop Services, Marked Tree, AR, “the farm economy in general” is the biggest growth-limiting factor facing his company’s market at the moment.

And this downturn isn’t limited to Arkansas. According to the Economic Research Service, grower income is forecast to be down 26% for 2006 to $54.4 billion. More troubling, this figure is below the average 10-year grower income level of $57.2 billion.

Charging More

Not surprisingly, most retailers have responded to this fuel price crunch with multiple programs to recover their expenses. In CropLife’s 2005 CropLife 100 survey, we asked retailers how they were dealing with higher fuel costs. Seventy-one percent indicated they were simply charging more for their application work. The second most popular choice was adding a fuel surcharge to their grower-customer bills at 35%. Several retailers were employing both options in 2005 (hence the 106% total percentage figure illustrated in the numbers, because the question asked for respondents to mark all options that were being tried). Still, somewhat surprisingly, almost one in four (24%) of the CropLife 100 retailers in 2005 weren’t trying to recover their higher fuel costs from grower-customers. Perhaps these retailers were afraid adding such costs to their service fees would convince their clients to “shop around” and leave them.

This reluctance has apparently subsided in 2006, however. According to the surveys turned in so far for this year’s CropLife 100, just short of 90% of responding retailers are charging more or adding fuel surcharges to their grower-customer bills.

Of course, a few retailers have employed novel approaches to keep their businesses profitable in this higher fuel price climate. According to Kathy Sims, president of Sims Fertilizer & Chemical Co., Osborne, KS, her company’s grower-customers have helped curb costs through their growing practices. “The continual growth of no-till farming has been key for our business to combat high fuel and operating costs,” says Sims. “We’ve seen significant growth in the last few years.”

Others foresee higher fuel prices leading to some previously untapped market opportunities, for grower-customers and their dealerships alike. “Ethanol should increase corn acres, which will be good for us,” says Dennis Montavon, general manager for Effingham Equity, Effingham, IL.

Topics:

Leave a Reply

Management Stories

StewardshipMichigan Agriculture Leaders On Toledo Water Ban: We Want To Be Part Of The Conversation
August 8, 2014
Leaders of Michigan agricultural organizations said Thursday that the government should not have a “knee-jerk reaction” based on last weekend’s water ban in Toledo due to fertilizer run-off in Lake Erie. Read More
ManagementRussia Bans U.S. And EU Ag Product Imports In Ukraine Sanctions Battle
August 7, 2014
Russian President Vladimir Putin has banned the import of agricultural goods from countries that have imposed sanctions on Russia. Read More
EmployeesAsmark Institute Dedicates New Training Center To Ford West
August 6, 2014
The Asmark Institute plans to recognize the retired industry leader's years of service to the fertilizer industry at the new state-of-the-art facility in Owensboro, KY. Read More
LegislationUSDA: Quick Implementation Of Disaster Assistance Programs A ‘Top Priority’
July 9, 2014
USDA has processed 106,000 payments to farmers in 40 states across the country who suffered livestock and grazing losses between Oct. 2011 and passage of the 2014 Farm Bill. Read More

Trending Articles

CropLife 100CHS To Build $3 Billion Fertilizer Plant In North Dakota
September 5, 2014
The fertilizer plant in Spiritwood will be the single largest investment in CHS history, as well as the single largest private investment project ever undertaken in North Dakota. Read More
EquipmentNew Holland Acquires Miller-St. Nazianz
September 3, 2014
The assets of Miller acquired as part of the transaction will become part of New Holland Agriculture, a CNH Industrial brand, building on a successful four-year partnership between the two companies. Read More
CropLife 100Pinnacle Acquires East Kansas Chemical
September 2, 2014
Ranked 82nd on the CropLife 100, East Kansas Chemical will operate as part of Pinnacle's Performance Agriculture brand. Read More
MAGIE 2014 ShowStopper
EquipmentJohn Deere Again Wins MAGIE ShowStopper Award
August 25, 2014
For the second consecutive year, John Deere was honored at the Midwest AG Industries Exposition (MAGIE) for its new R4045 sprayer. Read More
ManagementExpert To Discuss Farmland Value, Rent At Farm Science Review
August 18, 2014
While cropland values in Ohio increased in the past two years, they have remained flat in 2014, declining in some cases, according to an Ohio State University agricultural economist. Read More
EquipmentAdvance Your Technology IQ At MAGIE
August 13, 2014
The Midwest AG Industries Exposition (August 20-21) is the place you need to be to see, study and evaluate how new advances in the equipment, operations, crop protection and fertility sectors can help your business prosper. Read More

Latest News

CropLife 100Pinnacle Acquires Kansas-Based Cedar Ridge Supply
September 16, 2014
Cedar Ridge Supply will operate as part of Pinnacle's Performance Agriculture brand. Read More
StewardshipSecretary Vilsack Highlights Innovative Conservation Ef…
September 15, 2014
Nearly $16 million in Conservation Innovation Grants (CIGs) will be awarded to 47 organizations to help develop cutting-edge ideas to accelerate innovation in private lands conservation. Read More
Seed/BiotechSyngenta Responds To Cargill Lawsuit
September 15, 2014
Syngenta believes that the lawsuit is without merit and strongly upholds the right of growers to have access to approved new technologies. Read More
Equipment2014 Farm Science Review Launches Mobile App
September 15, 2014
Smartphone and tablet users planning on attending the 2014 Farm Science Review can now download this year’s customized mobile application. Read More
CropLife 100Southern States Coop Grower Sets Georgia Soybean Yield …
September 15, 2014
Georgia farmer Randy Dowdy's soybeans yielded an astonishing 110.66 bushels per acre, crushing the previous record of 82 bushels-per-acre. Read More
NIMITZ Treated vs Untreated pepper plant
InsecticidesNIMITZ Nematicide Approved By EPA
September 12, 2014
NIMITZ is a novel, non-fumigant nematicide with simplified application features, user safety and an active ingredient with a unique mode of action. Read More
InsecticidesMarrone Bio Innovations Receives Patent For Chromobacte…
September 11, 2014
The patent is the first step for MBI in developing a commercially viable product to inhibit infestations of corn rootworm larvae across America and other regions. Read More
HerbicidesDow AgroSciences: Keeping The Pipeline Stocked
September 11, 2014
Dow AgroSciences is embracing product diversity to drive the company’s future. Read More
CropLife 100CHS Is Official Partner Of New St. Paul Ballpark
September 10, 2014
The new ballpark in St. Paul, MN, officially became CHS Field with Twin Cities-based CHS Inc. revealed as the naming rights partner. Read More
EquipmentHagie Honors Farming Stewardship Leaders
September 10, 2014
The Iowa Farm Environmental Leader award recognizes Iowa farmers as environmental leaders that are committed to healthy soils and improved water quality. Read More
Precision AgPlantBeat: Your Plants’ Pulse In The Palm Of Your Han…
September 10, 2014
A new agronomic monitoring and recommendation service from Phytech could rewrite the book on real-time plant health status monitoring. Read More
StewardshipCCAs Making Headway With 4R Program In Lake Erie Wester…
September 9, 2014
Certified Crop Advisers are implementing the 4R Nutrient Stewardship Certification program in Lake Erie's Western Basin to improve water quality. Read More
MicronutrientsMicronutrients Going Macro
September 9, 2014
Between 2014’s fantastic growing conditions and a heightened awareness on plant nutrition, the major players in micronutrients are gearing up for another big year. Read More
Crop InputsFMC Announces Cheminova Takeover
September 8, 2014
FMC Corporation today announced that it has signed a definitive agreement to acquire Cheminova, a wholly owned subsidiary of Auriga Industries. Read More
HerbicidesValent’s Fierce XLT Herbicide Receives EPA Approv…
September 8, 2014
Valent U.S.A. Corp. announced today that Fierce XLT Soybean Herbicide is now federally registered for preemergence weed control in soybeans Read More
Eric SfiligojIndustry Consolidation Set To Increase Going Forward
September 8, 2014
As the agricultural marketplace moves into fall, one observer predicts the pace of consolidation will grow at all levels. Read More
LegislationCropLife America Leaders Address Regulatory Landscape, …
September 8, 2014
As CropLife America enters its 81st year, the organization’s leaders have seen another period of rapid and visible policy and public issue activity. Read More
FertilizerFall Fertility 2014: Forecasting Fertilizer Use
September 7, 2014
Great crops this year have tapped the soil, and fall work is definitely called for, but how challenging will that get? Read More